Posts
This link to an Open Europe News Summary Blog reveals that any country in the Euro Zone can print as many Euros as it wishes simply by notifying the European Central Bank. This is why Ireland was able to print 51 billion Euros last week to bail out its banks. Here's the quote from the Open Europe blog:
The Irish Independent learnt last night that the Central Bank of Ireland is financing €51bn of an emergency loan programme by printing its own money... ...A spokesman for the ECB said the Irish Central Bank is itself creating the money it is lending to banks, not borrowing cash from the ECB to fund the payments. The ECB spokesman said the Irish Central Bank can create its own funds if it deems it appropriate, as long as the ECB is notified.
This is very disturbing. In effect it allows mutliple, legitimate counterfeiters to print as much money as they wish; therefore, hyperinflation will ensue very quickly, because each Euro Zone member will have a great incentive to print money as fast as possible before prices go up. This could be the very quick end of the Euro, and it could create chaos in Europe and around the world.
American readers can consider this analogy: it is as if each state of the union could print as many dollars as it wished simply by notifying the Fed. Does anyone doubt that the dollar would collapse into hyperinflation overnight?
Click here: Open Europe blog: Is EMU a new Rouble zone?
Tuesday, January 25, 2011
Friday, January 14, 2011
Lessons from the Great German Hyperinflation of 1923
When Money Dies, by Adam Fergusson
Reviewed by Patrick Barron
Feel the need for a good, old-fashioned horror story, one that will make your hair stand on end? Maybe one that will cause bile to rise in your throat? Well, don’t bother to reread William Peter Blatty’s The Exorcist, Mary Shelley’s Frankenstein, or Bram Stoker’s Dracula. For a detailed account of the descent of an entire country into despair and barbarism read Adam Fergusson’s When Money Dies: The Nightmare of Deficit Spending, Devaluation, and Hyperinflation in Weimar Germany.
First published in 1975 and re-published in 2010 and made available through The Mises Institute, When Money Dies should dispel the notion that the rule of men is superior to the rule of law. Why “the rule of law”? Because it was the violation of the rule of law by governments themselves that supplanted the peaceful, liberal order of a gold-based international monetary system with one in which central banks, at governments’ behest, could print fiduciary media without limit. The full implication of this change was seen in Weimar Germany, the German people’s first experiment with representative democracy, where civilized society fell victim to the evils of the monetary printing press. For all practical purposes, the Mark was not worth the paper upon which it was printed. Eventually the Reichsbank issued the largest denomination note ever printed in the history of the world, a one hundred trillion-mark note, which no one would accept for payment. Be very careful if you believe that it can’t happen today.
Throughout Fergusson’s detailed, almost day-to-day description of government’s attempt to chase its tail around the inflationary circle and the pathetic, heart-rendering response of the great mass of the German people who tried to survive when their money became worthless, my thoughts kept returning to modern day America. The hair really did rise on the back of my neck and the bile really did rise in my throat when I realized that nothing had changed in the essential realm of our current monetary system; that is, that men rather than law control our money and their understanding of the very nature of money is no different than it was almost a century ago.
For those who believe that Germany’s central bank destroyed its own currency in order to print its way out of its World War I reparations payments, Fergusson gives compelling evidence to the contrary. One, there no evidence in the written record that German bankers ever secretly pursued this goal, and there is much written record. Two, in any case Germany was forced by the Treaty of Versailles to pay its reparations in gold or real goods anyway. So we must look elsewhere for the cause of the great currency inflation. And we need look no further than that men in positions of power were ignorant of monetary theory and had every incentive not to become knowledgeable about such theory.
Money production had become politicized throughout the world prior to World War I (Hum…I wonder is there is a cause-and-effect link here?) Rather than backing circulating currency to gold at least to some marginal extent, central banks engaged in a strategy to remove all the restrictions to their inflation of the money supply necessarily imposed upon them by the fact that the quantity of gold could not be inflated.
Hard as it may be to believe, Fergusson presents a compelling argument that the central bankers of Europe did not believe that the quantity of money had anything to do with the price level. And I suppose you think that our modern Fed rulers understand at least this much. Well, if they did they would not inflate the money supply. They would not issue statements that they are pursuing a two-percent inflation rate to achieve full employment. (By the way, full employment was one of the main justifications for the Reichsbank’s inflationist monetary policies. So nothing has changed. Central bankers still believe that monetary policy can lower the unemployment rate.) We see what happened in Weimar Germany. When a little monetary inflation failed to cure all ills, a little stronger dose was prescribed, and stronger and stronger doses until chaos reigned. Today’s pronouncements are no different. The Fed and their easy money, Keynesian-trained apologists are calling for even more monetary inflation. So we now have QE2 and maybe QE3 and QE4. It has not been ruled out and who or what will prevent it? Nothing, for failure of the latest monetary binge becomes justification for more. Furthermore, the near term advantages are irresistible. Bailouts are heralded by all who get the money, and the same apologists issue their propagandistic approval, which is disseminated by an ignorant mainstream media to a populace untrained in economics.
But the most important conclusion that one can draw from the great German hyperinflation experience is that money expansion is a prelude to and an enabler of war. The demise of the gold standard is the common thread that underlies the belligerency of the European powers around the turn of the 19th to the 20th century. America lagged behind somewhat but only somewhat. The ability to print money in unlimited quantities explains why the 20th century was the most brutally destructive in history. Printed money allows governments to embark on military adventurism, because it allows them to confiscate resources and reward key constituents. Even during Weimar Germany’s direst hours, there were those who knew how to benefit from the chaos. They were the scum of society plus the cream of society. The scum were all crooks and the cream was the politically connected industrial and financial elite. The middle class bore the lion’s share of the cost and was destroyed. Is this starting to sound familiar?
Today one must be either dependent upon welfare or receive too-big-to-fail bailouts in order to benefit from money expansion. Again, nothing has changed. The middle class scrambles to make ends meet while politically connected pressure groups benefit. In the meantime men who only yesterday were little more than highly paid extortionists, scamming state governments for the benefit of special interest groups, now send American troops, like so many toy soldiers, to every corner of the world. Our military is stretched to the breaking point while our strategic defenses suffer. This is why America was so eager to sign a disreputable new arms treaty with Russia—supposedly we can cut our strategic missile deterrence force in order to pay for expansions of the fruitless war on terror and new bread and circuses for the masses in the form of healthcare reform. Gone are the days of a strong defense and a non-interventionist foreign policy. And gone forever are the days of personal responsibility and living within one’s own means. To this we may give credit where credit is due—fiat money produced in unlimited amounts and showered on those who support the government.
This cannot last. For a sickening glimpse into the abyss that awaits, read When Money Dies.
Reviewed by Patrick Barron
Feel the need for a good, old-fashioned horror story, one that will make your hair stand on end? Maybe one that will cause bile to rise in your throat? Well, don’t bother to reread William Peter Blatty’s The Exorcist, Mary Shelley’s Frankenstein, or Bram Stoker’s Dracula. For a detailed account of the descent of an entire country into despair and barbarism read Adam Fergusson’s When Money Dies: The Nightmare of Deficit Spending, Devaluation, and Hyperinflation in Weimar Germany.
First published in 1975 and re-published in 2010 and made available through The Mises Institute, When Money Dies should dispel the notion that the rule of men is superior to the rule of law. Why “the rule of law”? Because it was the violation of the rule of law by governments themselves that supplanted the peaceful, liberal order of a gold-based international monetary system with one in which central banks, at governments’ behest, could print fiduciary media without limit. The full implication of this change was seen in Weimar Germany, the German people’s first experiment with representative democracy, where civilized society fell victim to the evils of the monetary printing press. For all practical purposes, the Mark was not worth the paper upon which it was printed. Eventually the Reichsbank issued the largest denomination note ever printed in the history of the world, a one hundred trillion-mark note, which no one would accept for payment. Be very careful if you believe that it can’t happen today.
Throughout Fergusson’s detailed, almost day-to-day description of government’s attempt to chase its tail around the inflationary circle and the pathetic, heart-rendering response of the great mass of the German people who tried to survive when their money became worthless, my thoughts kept returning to modern day America. The hair really did rise on the back of my neck and the bile really did rise in my throat when I realized that nothing had changed in the essential realm of our current monetary system; that is, that men rather than law control our money and their understanding of the very nature of money is no different than it was almost a century ago.
For those who believe that Germany’s central bank destroyed its own currency in order to print its way out of its World War I reparations payments, Fergusson gives compelling evidence to the contrary. One, there no evidence in the written record that German bankers ever secretly pursued this goal, and there is much written record. Two, in any case Germany was forced by the Treaty of Versailles to pay its reparations in gold or real goods anyway. So we must look elsewhere for the cause of the great currency inflation. And we need look no further than that men in positions of power were ignorant of monetary theory and had every incentive not to become knowledgeable about such theory.
Money production had become politicized throughout the world prior to World War I (Hum…I wonder is there is a cause-and-effect link here?) Rather than backing circulating currency to gold at least to some marginal extent, central banks engaged in a strategy to remove all the restrictions to their inflation of the money supply necessarily imposed upon them by the fact that the quantity of gold could not be inflated.
Hard as it may be to believe, Fergusson presents a compelling argument that the central bankers of Europe did not believe that the quantity of money had anything to do with the price level. And I suppose you think that our modern Fed rulers understand at least this much. Well, if they did they would not inflate the money supply. They would not issue statements that they are pursuing a two-percent inflation rate to achieve full employment. (By the way, full employment was one of the main justifications for the Reichsbank’s inflationist monetary policies. So nothing has changed. Central bankers still believe that monetary policy can lower the unemployment rate.) We see what happened in Weimar Germany. When a little monetary inflation failed to cure all ills, a little stronger dose was prescribed, and stronger and stronger doses until chaos reigned. Today’s pronouncements are no different. The Fed and their easy money, Keynesian-trained apologists are calling for even more monetary inflation. So we now have QE2 and maybe QE3 and QE4. It has not been ruled out and who or what will prevent it? Nothing, for failure of the latest monetary binge becomes justification for more. Furthermore, the near term advantages are irresistible. Bailouts are heralded by all who get the money, and the same apologists issue their propagandistic approval, which is disseminated by an ignorant mainstream media to a populace untrained in economics.
But the most important conclusion that one can draw from the great German hyperinflation experience is that money expansion is a prelude to and an enabler of war. The demise of the gold standard is the common thread that underlies the belligerency of the European powers around the turn of the 19th to the 20th century. America lagged behind somewhat but only somewhat. The ability to print money in unlimited quantities explains why the 20th century was the most brutally destructive in history. Printed money allows governments to embark on military adventurism, because it allows them to confiscate resources and reward key constituents. Even during Weimar Germany’s direst hours, there were those who knew how to benefit from the chaos. They were the scum of society plus the cream of society. The scum were all crooks and the cream was the politically connected industrial and financial elite. The middle class bore the lion’s share of the cost and was destroyed. Is this starting to sound familiar?
Today one must be either dependent upon welfare or receive too-big-to-fail bailouts in order to benefit from money expansion. Again, nothing has changed. The middle class scrambles to make ends meet while politically connected pressure groups benefit. In the meantime men who only yesterday were little more than highly paid extortionists, scamming state governments for the benefit of special interest groups, now send American troops, like so many toy soldiers, to every corner of the world. Our military is stretched to the breaking point while our strategic defenses suffer. This is why America was so eager to sign a disreputable new arms treaty with Russia—supposedly we can cut our strategic missile deterrence force in order to pay for expansions of the fruitless war on terror and new bread and circuses for the masses in the form of healthcare reform. Gone are the days of a strong defense and a non-interventionist foreign policy. And gone forever are the days of personal responsibility and living within one’s own means. To this we may give credit where credit is due—fiat money produced in unlimited amounts and showered on those who support the government.
This cannot last. For a sickening glimpse into the abyss that awaits, read When Money Dies.
More "Tragedy of the Commons" for the Euro
From today's Open Europe news summary:
"El País reports that the European Commission is working on a proposal to pool the issuance of sovereign debt, guaranteed by the eurozone rescue fund."
The is just another indication that no one in a position of power at the EU understands Professor Philipp Bagus' argument--in his excellent book The Tragedy of the Euro--that the Euro will succumb to the economic law known as "The Tragedy of the Commons", whereby a commonly held resource is plundered to extinction. Pooling sovereign debt absolves the most irresponsible nations from confronting their unsustainable spending by forcing more responsible nations to pick up the tab. All of the incentives are weighted in favor of irresponsibility and none to responsibility. No pie-in-the-sky plan by the EU to dictate budgets to its members will ever work. The members will either ignore such interference or, as has already happened, cook the books to make it appear that they are doing so.
"El País reports that the European Commission is working on a proposal to pool the issuance of sovereign debt, guaranteed by the eurozone rescue fund."
The is just another indication that no one in a position of power at the EU understands Professor Philipp Bagus' argument--in his excellent book The Tragedy of the Euro--that the Euro will succumb to the economic law known as "The Tragedy of the Commons", whereby a commonly held resource is plundered to extinction. Pooling sovereign debt absolves the most irresponsible nations from confronting their unsustainable spending by forcing more responsible nations to pick up the tab. All of the incentives are weighted in favor of irresponsibility and none to responsibility. No pie-in-the-sky plan by the EU to dictate budgets to its members will ever work. The members will either ignore such interference or, as has already happened, cook the books to make it appear that they are doing so.
Saturday, January 8, 2011
My Review of The Tragedy of the Euro, by Philipp Bagus
The Tragedy of the Euro, by Philipp Bagus
Reviewed by Patrick Barron
In this small gem of a book Professor Philipp Bagus of Universidad Rey Juan Carlos, Madrid has given us much more than an explanation of why the Euro will fail the common man in Europe. He has given us a grand lesson in power politics and economic reality that is applicable throughout the world at all times and all places.
The title of his book frames his economic argument. A resource succumbs to the “tragedy of the commons” when property rights in the resource either are missing or not sufficiently enforced. All grab for as much of the resource as quickly as they can until the resource is plundered to extinction. In this case, the Euro is the resource that is being plundered by the European elite in its bid for centralized power and special privileges at the expense of the common European citizen. This plunder has played out against a background of great change in Europe. The vision of a united post war Europe always meant two essentially different ideals—the liberal order (in the 19th century meaning of the term) of free trade and free migration, which would leave the nation states intact, vs. the statist ideal of a centralized European empire. The fall of the Soviet Union signaled the possibility that the liberal order would prevail following the brutality of 20th century socialism of the German and Russian varieties. This beneficial development would have meant the end of special privileges for the Euro-elite who had waged a several decades’ battle to hijack the post World War II European project.
The Liberal Vision of Post War Europe
The founders of modern, post war Europe had one aim in mind—the prevention of war by removing the need for war. The two 20th century European-initiated world wars had economic nationalism as their foundational cause. This process started during the so-called Progressive Era at the turn of the 19th to the 20th century and reached its zenith in the 1930s. In the heart of Europe, with an advanced industrial economy manned by an industrious people, Germany was especially vulnerable to trade barriers. Its home grown energy and food resources were inadequate to run its industrial economy and feed its dense population. As illustration, Professor Bagus reminds us that the British naval blockade of Germany in World War I doomed 100,000 Germans to the cruelest death of all—starvation. With the demise of free trade in the early 1930s, Germany was haunted by the specter of a renewal of its immediate post WWI fate of widespread famine. Therefore, it embarked on a campaign of conquest to secure lebensraum or “living room”, validating Bastiat’s dictum that when goods do not cross borders armies will. Combined with the destruction of the middle class during the 1923 hyperinflation the German people were easy targets for a tyrannical regime that promised economic security at the expense of freedom.
It was this scenario that the European integrationists hoped to avoid through four main avenues—free movement of people, capital, goods, and services within Europe. This goal has been largely achieved and has made a war between any two European states almost unthinkable today. This goal does not require a centralized enforcement mechanism or regulatory bureaucracy in order to function. It especially does not require a common currency among its members.
The Centralizing Vision of Post War Europe
Almost immediately after the formation of the first, modest European integration success, the formation of the European Coal and Steel Community, the European elite began its propaganda campaign to build a permanent European bureaucracy in order to secure special privileges for itself and its class. Dr. Bagus adds much to our understanding of this process. He explains that the European elite in different countries forms a class that transcends borders; that is, the elite in France, for example, have more in common with the elite in Germany and Spain than they do with their own countrymen who are common citizens. So French bureaucratic elite ensures that property developers in Spain and exporters in Germany get the funds they need at a low price. This is one battle line. Another battle line is composed along geographic boundaries. The Latin countries, with France as their leader, comprise a block that is less productive than the harder working and more capital intensive Nordic countries, with Germany as their leader. The goal of the Latin bloc is to institutionalize resource transfers from the north to the south. This is where the Euro proves to be a stealth weapon, for outright capital transfers are easy to see and understand and, thusly, can be limited, whereas the machinations of a central bank are not. Add to its complex dealings a propaganda campaign in which, just as in America, economists are “employed” to do research for the European Central Bank and, therefore, form a corrupt priestly class protecting the elite from honest criticism. It is shocking to learn the brazenness with which the European elite, which includes even the German courts, ignores or rationalizes away the treaty-born prohibitions that, supposedly, would prevent the European Central Bank from financing the sovereign debt of its members. This is a lesson that paper assurances mean nothing if the parties involved are dishonest and the citizenry is unwilling or unable to throw the rascals out.
Here is the heart of Professor Bagus’ contribution to our understanding. By grounding his explanation in solid Austrian economic concepts, we learn that the European Monetary Union (EMU) is both a Trojan horse for economic tyranny and, what probably is not understood even by its proponents, an impossible vehicle to sustain…it simply will fail of its inherent contradictions. Put in the simplest terms, the Euro will be plundered by the Latin bloc until inflation reaches unacceptable levels or until the Nordic bloc refuses to participate any longer and secedes from the European Monetary Union and possibly from the European Union itself.
Perhaps I lead a sheltered life, but I found The Tragedy of the Euro to read like a great adventure novel. Here we have heroes (mostly post war German bankers, resisting inflation) and villains (mostly post war Frenchmen, allied with post war German politicians, determined to keep the common German citizen paying and paying). The villains believe, falsely, that they can secure for all time their special privileges over the German citizenry—which is not the same as the German elite, who often collude with the French elite for their own privileges. But this is their great error, which Professor Bagus explains so clearly. They want to ignore the laws of economics by building coercive pan-European bureaucracies to enforce their will. But this will not work. How long it will last is the question.
The European financial crisis proceeds from day to day. This wonderful book will help everyone understand what is really happening and, we hope, provide a lesson for others. Are you listening, America?
Reviewed by Patrick Barron
In this small gem of a book Professor Philipp Bagus of Universidad Rey Juan Carlos, Madrid has given us much more than an explanation of why the Euro will fail the common man in Europe. He has given us a grand lesson in power politics and economic reality that is applicable throughout the world at all times and all places.
The title of his book frames his economic argument. A resource succumbs to the “tragedy of the commons” when property rights in the resource either are missing or not sufficiently enforced. All grab for as much of the resource as quickly as they can until the resource is plundered to extinction. In this case, the Euro is the resource that is being plundered by the European elite in its bid for centralized power and special privileges at the expense of the common European citizen. This plunder has played out against a background of great change in Europe. The vision of a united post war Europe always meant two essentially different ideals—the liberal order (in the 19th century meaning of the term) of free trade and free migration, which would leave the nation states intact, vs. the statist ideal of a centralized European empire. The fall of the Soviet Union signaled the possibility that the liberal order would prevail following the brutality of 20th century socialism of the German and Russian varieties. This beneficial development would have meant the end of special privileges for the Euro-elite who had waged a several decades’ battle to hijack the post World War II European project.
The Liberal Vision of Post War Europe
The founders of modern, post war Europe had one aim in mind—the prevention of war by removing the need for war. The two 20th century European-initiated world wars had economic nationalism as their foundational cause. This process started during the so-called Progressive Era at the turn of the 19th to the 20th century and reached its zenith in the 1930s. In the heart of Europe, with an advanced industrial economy manned by an industrious people, Germany was especially vulnerable to trade barriers. Its home grown energy and food resources were inadequate to run its industrial economy and feed its dense population. As illustration, Professor Bagus reminds us that the British naval blockade of Germany in World War I doomed 100,000 Germans to the cruelest death of all—starvation. With the demise of free trade in the early 1930s, Germany was haunted by the specter of a renewal of its immediate post WWI fate of widespread famine. Therefore, it embarked on a campaign of conquest to secure lebensraum or “living room”, validating Bastiat’s dictum that when goods do not cross borders armies will. Combined with the destruction of the middle class during the 1923 hyperinflation the German people were easy targets for a tyrannical regime that promised economic security at the expense of freedom.
It was this scenario that the European integrationists hoped to avoid through four main avenues—free movement of people, capital, goods, and services within Europe. This goal has been largely achieved and has made a war between any two European states almost unthinkable today. This goal does not require a centralized enforcement mechanism or regulatory bureaucracy in order to function. It especially does not require a common currency among its members.
The Centralizing Vision of Post War Europe
Almost immediately after the formation of the first, modest European integration success, the formation of the European Coal and Steel Community, the European elite began its propaganda campaign to build a permanent European bureaucracy in order to secure special privileges for itself and its class. Dr. Bagus adds much to our understanding of this process. He explains that the European elite in different countries forms a class that transcends borders; that is, the elite in France, for example, have more in common with the elite in Germany and Spain than they do with their own countrymen who are common citizens. So French bureaucratic elite ensures that property developers in Spain and exporters in Germany get the funds they need at a low price. This is one battle line. Another battle line is composed along geographic boundaries. The Latin countries, with France as their leader, comprise a block that is less productive than the harder working and more capital intensive Nordic countries, with Germany as their leader. The goal of the Latin bloc is to institutionalize resource transfers from the north to the south. This is where the Euro proves to be a stealth weapon, for outright capital transfers are easy to see and understand and, thusly, can be limited, whereas the machinations of a central bank are not. Add to its complex dealings a propaganda campaign in which, just as in America, economists are “employed” to do research for the European Central Bank and, therefore, form a corrupt priestly class protecting the elite from honest criticism. It is shocking to learn the brazenness with which the European elite, which includes even the German courts, ignores or rationalizes away the treaty-born prohibitions that, supposedly, would prevent the European Central Bank from financing the sovereign debt of its members. This is a lesson that paper assurances mean nothing if the parties involved are dishonest and the citizenry is unwilling or unable to throw the rascals out.
Here is the heart of Professor Bagus’ contribution to our understanding. By grounding his explanation in solid Austrian economic concepts, we learn that the European Monetary Union (EMU) is both a Trojan horse for economic tyranny and, what probably is not understood even by its proponents, an impossible vehicle to sustain…it simply will fail of its inherent contradictions. Put in the simplest terms, the Euro will be plundered by the Latin bloc until inflation reaches unacceptable levels or until the Nordic bloc refuses to participate any longer and secedes from the European Monetary Union and possibly from the European Union itself.
Perhaps I lead a sheltered life, but I found The Tragedy of the Euro to read like a great adventure novel. Here we have heroes (mostly post war German bankers, resisting inflation) and villains (mostly post war Frenchmen, allied with post war German politicians, determined to keep the common German citizen paying and paying). The villains believe, falsely, that they can secure for all time their special privileges over the German citizenry—which is not the same as the German elite, who often collude with the French elite for their own privileges. But this is their great error, which Professor Bagus explains so clearly. They want to ignore the laws of economics by building coercive pan-European bureaucracies to enforce their will. But this will not work. How long it will last is the question.
The European financial crisis proceeds from day to day. This wonderful book will help everyone understand what is really happening and, we hope, provide a lesson for others. Are you listening, America?
Sunday, December 26, 2010
The Foundation of Peace and Free Trade
I added this comment to an excellent essay by CATO's Dan Griswold:
The U.S. should declare itself a free trade nation, regardless of the actions of other nations. As we become more prosperous, our example will do more for the free trade movement than all the international agreements and excellent essays, such as this one, combined.
There is another, more basic, reason for free trade. Frederic Bastiat explained in his 1850 book The Law that man is born free. He owns himself. He is not owned by any other men or by a government, because government is formed by free men and, as such, can do only what other free men can do...and enslave another is not one of those things. From this basic and unassailable tenet Bastiat explains the limits of government. Forbidding trade among men is not a legal power that can be exercised by a legally formed government.
The U.S. should declare itself a free trade nation, regardless of the actions of other nations. As we become more prosperous, our example will do more for the free trade movement than all the international agreements and excellent essays, such as this one, combined.
There is another, more basic, reason for free trade. Frederic Bastiat explained in his 1850 book The Law that man is born free. He owns himself. He is not owned by any other men or by a government, because government is formed by free men and, as such, can do only what other free men can do...and enslave another is not one of those things. From this basic and unassailable tenet Bastiat explains the limits of government. Forbidding trade among men is not a legal power that can be exercised by a legally formed government.
Saturday, December 25, 2010
My Letter to National Review--Let Big Government Collapse
From: patrickbarron@msn.com
To: letters@nationalreview.com
Subject: Let Big Government Collapse
Date: Sat, 18 Dec 2010 20:43:15 -0500
Dear Sirs:
After devouring your December 20th issue, it is almost impossible to come to any other conclusion than that Big Government is the enemy of the people everywhere. Jim Manzi's "Unbundle the Welfare State", Andrew Stuttaford's "PIIGS to the Slaughter", and "The Enemy Within" by Ian Murray and F. Vincent Vernuccio cannot help but list case after case of the immense damage done to the common man by Big Government. The answer is NOT to figure out how to save Big Government, but how to convince the common man that he can do better without Leviathan. The common man does not need government to provide him with a retirement income or healthcare, much less oversee the terms of his employment, the quality of his children's day care, and all the other preposterous so-called "services" that supposedly protect him from the normal vagaries of life. Let the whole corrupt house of cards collapse, along with government's bought-and-paid-for supporters, from the big banks to the public sector employees and to all those who get money from the government only because the government takes it from others at the point of a gun. Return government to the American Founders' ideal of limited government that protects our lives, liberties, and property. The free market and an honest court system will take care of all the rest.
Patrick Barron
To: letters@nationalreview.com
Subject: Let Big Government Collapse
Date: Sat, 18 Dec 2010 20:43:15 -0500
Dear Sirs:
After devouring your December 20th issue, it is almost impossible to come to any other conclusion than that Big Government is the enemy of the people everywhere. Jim Manzi's "Unbundle the Welfare State", Andrew Stuttaford's "PIIGS to the Slaughter", and "The Enemy Within" by Ian Murray and F. Vincent Vernuccio cannot help but list case after case of the immense damage done to the common man by Big Government. The answer is NOT to figure out how to save Big Government, but how to convince the common man that he can do better without Leviathan. The common man does not need government to provide him with a retirement income or healthcare, much less oversee the terms of his employment, the quality of his children's day care, and all the other preposterous so-called "services" that supposedly protect him from the normal vagaries of life. Let the whole corrupt house of cards collapse, along with government's bought-and-paid-for supporters, from the big banks to the public sector employees and to all those who get money from the government only because the government takes it from others at the point of a gun. Return government to the American Founders' ideal of limited government that protects our lives, liberties, and property. The free market and an honest court system will take care of all the rest.
Patrick Barron
Friday, December 24, 2010
Another Bad Idea
From today's Open Europe news summary:
To quote a portion of the above report, the "new fund would in principle have access to 'unlimited refinancing' in order to secure the health of the single currency." This just does not make any sense. Where will the fund get the Euros for this "unlimited refinancing"? It is obvious that the European Central Bank will print the money. This will in no way strengthen the Euro, but will debased it. Further down in the same news summary was a report that Bloomberg News was suing to obtain information that the Greek government had used derivatives and swaps to hide the magnitude of its real debt. We must remember that the fund would be lending not to owners with their own financial assets at stake but to politicians and bureaucrats temporarily placed in powerful offices. The primary goal of such people is to secure their own jobs and their own well-being by buying off powerful internal constituents. Finally, the very idea that Europe should bail out failing economies reveals a complete lack of understanding of the law of moral hazard and the real purpose of a market economy. Prosperity is NOT secured through taxing profitable enterprises--even if indirectly through currency debasement--in order to allow unprofitable enterprises to continue. This is a prescription for capital consumption on a massive scale, because politicians and bureaucrats will have no objective criteria to determine where the "unlimited refinancing" line can be drawn.
Patrick Barron
German Finance Ministry outlines new eurozone bailout institution;
Euro must be based on “German stability interests” as concession for
support
Sueddeutsche reports that a leaked position paper has revealed that the German Finance Ministry has drawn up proposals for a new body, named the “European Stability and Growth Investment Fund”, to manage the permanent eurozone bailout fund planned for 2013, the European Stability Mechanism. If granted loans from the fund, countries would be required to provide 120% in collateral in the form of gold reserves, stakes in companies, or revenue rights, the newspaper said. The fund would also be able to buy existing European government bonds, freeing the ECB from this task.
Reuters quotes the Ministry’s paper saying that Germany will affirm its “national interest” rests in maintaining the single currency. The euro, however, must “orientate itself on German stability interests” as a “concession to Germany, as the largest economy in the euro zone, serving as an anchor of stability.” According to Sueddeutsche, the new fund would in principle have access to “unlimited refinancing” in order to secure the health of the single currency. The Ministry confirmed the existence of the paper but said it had not approved the proposal, nor had the German government.
To quote a portion of the above report, the "new fund would in principle have access to 'unlimited refinancing' in order to secure the health of the single currency." This just does not make any sense. Where will the fund get the Euros for this "unlimited refinancing"? It is obvious that the European Central Bank will print the money. This will in no way strengthen the Euro, but will debased it. Further down in the same news summary was a report that Bloomberg News was suing to obtain information that the Greek government had used derivatives and swaps to hide the magnitude of its real debt. We must remember that the fund would be lending not to owners with their own financial assets at stake but to politicians and bureaucrats temporarily placed in powerful offices. The primary goal of such people is to secure their own jobs and their own well-being by buying off powerful internal constituents. Finally, the very idea that Europe should bail out failing economies reveals a complete lack of understanding of the law of moral hazard and the real purpose of a market economy. Prosperity is NOT secured through taxing profitable enterprises--even if indirectly through currency debasement--in order to allow unprofitable enterprises to continue. This is a prescription for capital consumption on a massive scale, because politicians and bureaucrats will have no objective criteria to determine where the "unlimited refinancing" line can be drawn.
Patrick Barron
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